Retail Industry in India: Trends, Key Driving Factors and Socio-Economic Impact

-A.M.Narahari, Registrar.St . Aloysius College (Autonomous), Mangalore

amnarahari@gmail.com

National Seminar on

“Marketing Revolution: Emerging Trends in Retail Marketing”

Vidyodaya Arts & Commerce First Grade College, T.Narasipura.

September 17, 2011

Traditional Vs Modern Retail Industry

• Family Owned Vs Corporate-MNCs

• Sellers’ Market- Buyers’ Market

• Un Organised Vs Organised• Limited Competition• Limited Choices• Less Brand Loyalty• Retailer Domination• Mom and Pop Stores• Cost Driven• Less Innovation• Single Location Operation

Indian Consumer

• Value-for Money-Buy• More shopping time• Less customer service• Retailers’ Reputation• ‘Lifestyle’ was rare• Hawkers and local markets

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TRENDS

1. Projected as Prominent service industry- substantial contribution to GDP- about 10-14% of GDP

2. Corporate entry- small to large - Internationalisation – entry of MNCs- international brands

3. Phenomenal growth- Traditional on the decline -96% to 80% & Organised on the rise-4% to 20%

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TRENDS cont…

4. Electronic Mode- Technology driven-information explosion

5. Urbanisation- Almost 33% of the population

6. Facilitating Consumerism -Changing life style

7. Impetus to food & groceries

8. New value added services-non-store outlets, entertainemt, restaurants, games, etc.

•  

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ENTRY OF LUXURY PRODUCTS• Jewellery Graded Watches

and Pens• Branded Jewellery• Crystalware by the likes of

Swarovsky• Designerware Clothes,

Shoes, Ties & Suits• Luxury Automobiles (Cars, Buses, Two-

Wheelers and Others)

• Healthcare & Fitness Products

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RETAIL MARKET PLAYERS• Large Retail Formats• Automatic Vending

Machines• Direct Mail &

Catalogue• TV Home Shopping• Online Retailing• Telemarketing• Direct Selling

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CONSPICUOUSNESS OF RETAIL MARKET

• Chinese Products• Bottom of the Pyramid

Approach of C.K.Prahlad• Mass Marketing(civil

aviation, Railways)• Rural Marketing• Products Tailor-made for the

customers(Seasonal Insurance Premium Products, Micro-finance and Biometric Transactions, ITC Choupal)

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KEY DRIVING FACTORS• Demographic Changes-

Youthful-enhanced life expectancy-larger labour foce- urbanization

• Value Shift- Joint Family to Nuclear Family, Material Culture Vs Thrift & Simplicity, Luxury Vs Necessities-Conservatism to consumerism- Changing life styles

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KEY DRIVING FACTORS• Liberal Policy

perspectives in retail markets for speedier economic growth

• Rising Income• Consumer Finance• Aggressive

Marketing

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KEY DRIVING FACTORS• Western Lifestyles• TV Channels• Organised

Retailing• Corporate Entry• Franchisee for

Foreign Brands• Urbanisation• Credit Card

Marketing

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TECHNOLOGY-THE ENABLER• Reaching Customers• Promotion• Buying• Delivery • Payment• Servicing• Interactive Maintenance• Information• Getting the Response• Getting the Feedback

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SOCIO- ECONOMIC IMPACT• Customer is the king- Still

limited choice• Facilitating economic

growth- issue of uneven growth, regional disparities- wide gap in income distribution

• Convenient life style• New Paradigm in price

mechanisms- economies of large scale-discount stores

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SOCIO- ECONOMIC IMPACT• Cultural impact- India is

like EU- 29 states equal 10-12 countries in terms of language, culture & economic development

• Unorganized retail market in an agrarian economy

• Mind game –consumer obsession- Food Stores- KFC- McDonald- Junk foods

• Real Estate Issues

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SOCIO- ECONOMIC IMPACT• Deceptive pricing

strategies- Discount offerings- Buyer beware concept still relevant-predatory pricing – Monospony market

• Unethical practices-Corruption

• Genetically modified – Artificially blended-makeshift strategies for taking the consumer for a ride

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Foreign Direct Investment: Is it wise to allow a free entry?

• WTO- GATS obligations• Industry strongly advocating

supported by the Planning Commission & concerned ministries

• FDI already existing –JV, franchising, cash & carry operation, direct marketing, 51% in single brand retail- issue of direct investment

• Focus on two issues- Employment & Consumer Welfare- study shows decline in employment elasticity with liberalization

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KEY ISSUESI: Uniqueness of Indian retail market- • a. end consumers reached through

– i. Vertical separation- through retailers– ii. Vertical integration- direct

• But India -small-highly fragmented- unorganized• Customer relation established by small retailers• No barrier for entry or exit• Socio-political stability in terms of employment• Under employment- disguised employment highest• Organised market in nascent stage

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II: Benefits of FDI : Pull-Push Factors

Pull• Organized players

collaborate to expand• Expertise available

with world leaders• Meeting foreign

currency crisis• can satisfy customers

Push• They are interested in India• Emerging mkt- even for

procurement-handicraft & semi-finished

• Share of FDI declining in developed countries

• Internationalization-great opportunity for maxmising return on investment

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KEY ISSUES

III: Impact on marginal producers & Workforce- experience of other countries

IV: Impact on existing Labour Laws

V: Safeguard options available to Government to protect small producers/suppliers- MFN, National Treatment concepts

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Challenges Ahead • Empowering small retailers for an inclusive

growth- effective co-existence with organized market- corporate social responsibility-bottom of the pyramid approach

• Retail cooperatives for small retailers- this may facilitate QR (quick response & ECR (efficient consumer response)

• More effective Consumer education- protection- • Regulations for protecting cultural identity• Promoting ethical practices

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Challenges Ahead • Merger & Acquisitions of weak outlets• Change of mindset of retailers with the

support of manufacturers to satisfy the target customers

• Use of technology for business excellence by setting up a network of independent firms

• Setting up of franchisee organization- & non-store retailing channels

• Liberalisation with a human face

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REFERENCES1. Narayana, K.G. S & P.K. Sudarsan ( 2008): Globalisation of

Retailing: An Indian Perspective, The associated Publishers, NewDelhi

2. Vedamani, Gibson G ( 2010) : Retail Management: Functional Principles and Practices , JAICO , Mumbai

3. Soni, Ajaya N ( 2010) : Retail Management , Oxford Book Company

4. Shewan, M.A. ( 2008): Retail Management , Sonali Publications, New Delhi

5. Rosemary, Varky & Rafiq Mohammed ( 2007) : Principles of Retail management, Palgrave Mcmillan, Newyork

6. www:google.com, accessed on September 06, 07,08 and 13, 2011

7. Inputs from various Scholars